In today’s competitive world, you need money for everything from funding your own business to paying for the education of your children. One of the first thoughts to come to one’s mind is, “Where do I get the money from?” Today, there are several ways in which a person can source money but one of the easiest ways is to take up a loan. One such loan that is available to people today is the ‘loan against property’.
The first thing to do would be to understand what a ‘loan against property’ is. A ‘loan against property’ in simple language is a loan which is disbursed or sanctioned against the mortgage of one’s property. The property which is being mortgaged by one can be any property which is occupied by the person or rented out to someone for use. The property can be both in the form of a flat or in the form of a piece of land.
Banks will specify different eligibility criteria for one to be able to take up such a loan. Some of the criteria include a study to ensure that a person’s finances are of sound nature. The bank undertakes a study as to how much you earn, how your savings are, as well as the debts you have. A check will also be done to make sure that you have cleared all previous loans and that you have a clean record when it comes to making credit card payments.
The ‘loan against property’ can be very helpful as it can be used for a varied range of purposes. The value of the property being mortgaged by you will also be gauged minutely by the bank before sanctioning a loan on the same. A ‘loan against property’ is considered to be a secured loan because the borrower of money provides the bank with a guarantee where the property is kept in the form of security. This loan can usually be taken for a period of 15 years. Usually, the rate of interest on such a loan is between 12-15%
Some people may ask if there is a difference between this loan and a personal loan. The answer is, “Yes, there is a difference between the two types of loans.” The personal loan falls under the category of being an unsecured loan as the borrower does not provide the bank with any kind of security at the time of taking the loan. The rate of interest charged on a personal loan is higher as compared to the interest charged on a loan against property.
Also, a personal loan can be taken only for a period of 5 years. The ‘loan against property’ is one of the best ways of sourcing money. However, one main disadvantage is that the bank will take hold of the property mortgaged in case the borrower is unable to repay the loan. A person should only take up such a loan if he is sure that he will be able to repay the same in due time.